dollar savings in only using resources when you need them,” observes Jason Stowe, CEO of Cycle Computing. For example, he illustrates, insurers tend to go through busy periods when they need greater IT capacity, and it’s more cost-effective to only pay for what they need when they use it. “The workload at insurance companies tends to be ‘bursty,’ with month, quarter and year-end calculations,” he explains.

The availability of cloud computing on an as-
needed basis is already reshaping IT budgets, says
Chris Curran, chief technology officer for Chicago-
based Diamond Management and Technology Con-
sultants. “Cloud computing and the growth of on-
demand software now beg the question: How can
the rest of the business justify their technology
spending to the CIO?” he asks. “IT budgets are be-
ing reshaped by the ability of the rest of the busi-
ness to provision technology capabilities outside
the procurement radar.”
The trend toward accessing outside IT resources
was documented in Diamond Management’s own
recent CIO survey, which found that 70% of senior
business and IT executives reported that close to a
third of their company’s IT spending was outside
the IT department.

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THE ECONOMIC DEMANDS ON AN INFORMATION TECHNOLOGY department as a cost-cutting provider of more sophisticated, brand-dif-ferentiating technology products and services have been great; so great that some in the insurance sector may have some catching up to do. According to the Financial Services CIO Advisory team of New York-based PricewaterhouseCoopers, those financial services companies, insurers included, that restructured their IT departments to provide technology services on a supply-and-demand basis have not realized the cost-controlling benefits they hoped for.

In fact, the intent behind the effort—to benefit both business and IT by reducing the cost of operations through economies of scale and offering access to a simplified set of standardized services at the lowest possible cost—has held an unintended consequence.

“This IT business model has limited the ability of chief information officers (CIO) to be strategic business partners and diverted attention of the IT organization away from high-value contributions,” notes the advisory team’s report.

So how does an insurance CIO in this category dare pitch for more budget consideration? Julien Courbe, director of PricewaterhouseCoopers’ Financial Services CIO Advisory practice and executive editor of the Financial Services Technology Journal, suggests insurers start by repositioning IT as a hub of innovation and driver of enter-prisewide collaboration.

“When the CIO is perceived to be yet another external services pro-
vider, he or she is not positioned to influence the business vision and is
left to play a reactive role, often mired in a conflict-ridden game of main-
tenance, margins and cost reductions,” says Courbe. “The IT organiza-
tion needs to resist the urge of remaining ‘business as usual,’ and refocus
its energy and resources on being effective, innovative and strategic
business partners embedded within the business units they support.”
According to the PWC report, the IT organization that builds a mature
management information capability will tend to focus on the need to first
assess the maturity of the organization as a whole, which helps manage
innovation and chart the course toward a highly innovative IT organiza-
tion. A highly innovative organization, in turn, earns back lost credibility,
authority and preference when forecasts are revised.